Neonode(NEON) - 2022 Q4 - Annual Report

PART I Business Neonode Inc. provides optical sensing solutions through zForce technology licensing and Touch Sensor Module sales, targeting automotive, printer, and contactless touch markets - The company operates through zForce optical sensing technology licensing to OEMs and Touch Sensor Module (TSM) manufacturing and sales[19][20] - As of December 31, 2022, Neonode held 35 technology license agreements and 10 TSM reseller agreements[21][26] - Strategic goals include leading contactless touch interfaces for elevators and kiosks, maintaining optical touch licensing leadership in printers and automotive, and entering the automotive driver monitoring market[36][37] Revenue by Market Segment (as % of Total Revenue) | Market Segment | 2022 | 2021 | | :--- | :--- | :--- | | Automotive (license fees) | 27% | 27% | | Consumer electronics (license fees) | 51% | 55% | | TSMs (products) | 18% | 16% | | Non-recurring engineering | 4% | 2% | Revenue by Geographic Region (as % of Total Revenue) | Geographic Region | 2022 | 2021 | | :--- | :--- | :--- | | U.S. | 33% | 39% | | Japan | 31% | 33% | | South Korea | 15% | 15% | | Switzerland | 7% | 1% | | Germany | 5% | 5% | | Other | 9% | 7% | - The company faces competition from resistive and capacitive touch solutions, camera-based gesture detection, and driver monitoring software providers like SmartEye and Seeing Machines[52][55][56] Intellectual Property Portfolio as of Dec 31, 2022 | Jurisdiction | Issued Patents | Pending Patents | | :--- | :--- | :--- | | United States | 48 | 9 | | Europe | 11 | 5 | | Japan | 7 | 1 | | China | 6 | 1 | | South Korea | 6 | 1 | | Total | 78 | 18 | - Research and development expenses were $4.0 million in 2022 and $3.5 million in 2021[61] - As of December 31, 2022, the company employed 55 individuals and 7 consultants[65] Risk Factors The company faces significant risks including historical net losses, customer and supplier dependency, intellectual property challenges, and potential stock dilution - The company has a history of substantial net losses and may require additional capital, potentially leading to significant stockholder dilution[70][71] - In 2022, four customers generated approximately 68% of consolidated net revenues, indicating significant concentration risk[72] - Reliance on component suppliers like Texas Instruments and ST Microelectronics for ASICs poses supply chain disruption risks from quality or availability issues[76][77] - Limited hardware manufacturing experience subjects the sensor module business to risks in component sourcing, production capacity, and sales channel establishment[80][81] - The company is highly dependent on its senior management team, including CEO Dr. Urban Forssell and CFO Fredrik Nihlén[89] - Significant business in foreign currencies, primarily the Swedish Krona, exposes the company to unhedged currency exchange rate risks[94] - The two largest stockholders, also board members, hold approximately one-fourth of outstanding voting stock, creating ownership concentration impacting stockholder votes[103] Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - No unresolved staff comments were reported[108] Properties As of December 31, 2022, the company leases corporate headquarters in Stockholm and a workshop in Kungsbacka, Sweden - The company leases corporate headquarters in Stockholm and a workshop in Kungsbacka, Sweden[109] Legal Proceedings The company is not currently a party to any pending legal proceedings - The company is not a party to any pending legal proceedings[110] Mine Safety Disclosures This item is not applicable to the company - This disclosure item is not applicable[111] PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on Nasdaq under 'NEON', with 37 stockholders of record as of February 8, 2023 - The company's common stock is listed on the Nasdaq Stock Market under the symbol NEON[114] - As of February 8, 2023, there were 37 stockholders of record[114] Management's Discussion and Analysis of Financial Condition and Results of Operations In FY2022, total revenue decreased slightly to $5.67 million, while operating loss improved to $5.3 million, supported by $14.8 million cash Financial Results Summary (in thousands) | Metric | 2022 | 2021 | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenue | $5,670 | $5,836 | (2.8)% | | License fees | $4,470 | $4,787 | (6.6)% | | Products | $995 | $955 | 4.2% | | Non-recurring engineering | $205 | $94 | 118.1% | | Total Gross Margin | $4,866 | $4,881 | (0.3)% | | Total Operating Expenses | $10,152 | $11,988 | (15.3)% | | Operating Loss | $(5,286) | $(7,107) | (25.6)% | | Net loss attributable to Neonode Inc. | $(4,883) | $(6,450) | (24.3)% | | Net loss per share | $(0.36) | $(0.54) | (33.3)% | - The decrease in 2022 license fees was primarily due to component shortages in printer and automotive markets, with recovery noted in the second half[161] - Sales and marketing expenses decreased by 28.4% and General and administrative expenses decreased by 25.8% in 2022, reducing operating loss[168][170] - The company ended 2022 with $14.8 million in cash, down from $17.4 million in 2021, with working capital stable at $19.1 million[188] - Net cash used in operating activities was $6.8 million for 2022, an improvement from $7.7 million in 2021[189][191] - The company raised approximately $4.7 million in 2022 and an additional $7.9 million in January 2023 through its At-the-Market (ATM) offering program[198][199][373] Quantitative and Qualitative Disclosures About Market Risk This item is not applicable to the company - This disclosure item is not applicable[204] Financial Statements and Supplementary Data This section presents the company's audited consolidated financial statements for FY2022 and FY2021, with the auditor's report identifying unbilled licensing revenues as a critical audit matter - The section includes audited consolidated financial statements and the report from KMJ Corbin & Company LLP, the independent registered public accounting firm[206][207] - The auditor's report identifies "Accounting for Licensing Revenues" as a Critical Audit Matter due to subjective judgments in estimating unbilled royalties[212][214][215] Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Total Assets | $21,198 | $22,992 | | Cash | $14,816 | $17,383 | | Total current assets | $20,798 | $22,032 | | Total Liabilities | $1,780 | $3,155 | | Total current liabilities | $1,699 | $2,973 | | Total Stockholders' Equity | $19,418 | $19,837 | - The company incurred net losses of $4.9 million in 2022 and $6.5 million in 2021, resulting in an accumulated deficit of $207.5 million as of December 31, 2022[233] - On October 1, 2022, the company acquired the remaining 49% of Pronode Technologies AB, making it a wholly-owned subsidiary[244] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - No changes or disagreements with accountants were reported[375] Controls and Procedures As of December 31, 2022, management concluded that disclosure controls and internal control over financial reporting were effective, with no material changes reported - Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of December 31, 2022[375] - Management concluded that internal control over financial reporting was effective as of December 31, 2022, based on COSO framework criteria[380] - No material changes to internal control over financial reporting occurred during the fourth quarter of 2022[377] Other Information The company reports no other information for this item - No other information was reported for this item[382] Disclosure Regarding Foreign Jurisdictions That Prevent Inspections This item is not applicable to the company - This disclosure item is not applicable[382] PART III Directors, Executive Officers and Corporate Governance Information regarding directors, executive officers, and corporate governance is incorporated by reference from the 2023 proxy statement - Information is incorporated by reference from the definitive proxy statement for the 2023 Annual Meeting of Stockholders[384] Executive Compensation Information concerning executive compensation is incorporated by reference from the 2023 proxy statement - Information is incorporated by reference from the definitive proxy statement for the 2023 Annual Meeting of Stockholders[385] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information concerning security ownership is incorporated by reference from the 2023 proxy statement - Information is incorporated by reference from the definitive proxy statement for the 2023 Annual Meeting of Stockholders[386] Certain Relationships and Related Transactions, and Director Independence Information concerning related party transactions and director independence is incorporated by reference from the 2023 proxy statement - Information is incorporated by reference from the definitive proxy statement for the 2023 Annual Meeting of Stockholders[387] Principal Accounting Fees and Services Information concerning principal accounting fees and services is incorporated by reference from the 2023 proxy statement - Information is incorporated by reference from the definitive proxy statement for the 2023 Annual Meeting of Stockholders[388] PART IV Exhibits, Financial Statement Schedules This section lists financial statements filed under Item 8 and provides a detailed list of all exhibits filed with the Annual Report - The consolidated financial statements are filed under Item 8 of the report[391] - A detailed list of exhibits is provided, including corporate governance documents, material contracts, and Sarbanes-Oxley certifications[394] Form 10-K Summary The company has not provided a Form 10-K summary - No Form 10-K summary has been provided[395]